September 7, 2010
Bank of Japan

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided,by a unanimous vote,1 to set the following guideline for money market operations for theintermeeting period:
The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around
0.1 percent.
2. Japan's economy shows further signs of a moderate recovery. Exports and production havebeen increasing, albeit at a slower pace. Business fixed investment is showing signs ofpicking up. The employment and income situation has remained severe, but the degree ofseverity has eased somewhat.

In these circumstances, private consumption has been

generally picking up and has recently been boosted by the extremely hot weather and alast-minute increase in demand for durable consumer goods ahead of the expiration of thepolicy measure.

Public investment is declining.

continued to show signs of easing.

Meanwhile, financial conditions have

The CPI (excluding fresh food) is declining on a

year-on-year basis due to the substantial slack in the economy as a whole, but the slowing
trend in the pace of decline has continued.
3. The Bank's baseline scenario projects that the economy is likely to be on a recovery trend.
With regard to prices, based on the assumption that medium- to long-term inflation
expectations remain stable, the year-on-year rate of decline in the CPI (excluding fresh food)is expected to slow as the aggregate supply and demand balance improves gradually.
4. With regard to economic activity, there are some upside risks such as faster growth inemerging and commodity-exporting economies. On the other hand, against the backdrop ofincreased uncertainty about the future, especially for the U.S. economy, and associatedinstability in the foreign exchange and stock markets, attention should be paid to downside
risks to Japan's economy.

1

With regard to prices, there is a possibility that inflation will rise

Voting for the action: Mr. M. Shirakawa, Mr. H. Yamaguchi, Mr. K. G. Nishimura, Ms. M. Suda, Mr. T.
Noda, Mr. S. Nakamura, Mr. H. Kamezaki, Mr. R. Miyao, and Mr. Y. Morimoto. Voting against theaction: None.

1more than expected due to a rise in commodity prices brought about by higher growth rates inemerging and commodity-exporting economies, while there is also a risk that the rate ofinflation might decline due, for example, to a decline in medium- to long-term inflation
expectations.
5. The Bank recognizes that Japan's economy faces the critical challenge of overcoming
deflation and returning to a sustainable growth path with price stability. To this end, theBank has been striving to pursue powerful monetary easing, ensure financial market stability,
and support strengthening the foundations for economic growth, and it will continue toconsistently make such contributions as central bank. In the conduct of monetary policy, theBank will maintain the extremely accommodative financial environment. The Bank will
carefully examine the outlook for economic activity and prices, and, if judged necessary, takepolicy actions in a timely and appropriate manner.

2(Reference)
Meeting hours:
September 6: 14:00-16:29
September 7: 9:00-12:34
Policy Board members present:
Masaaki Shirakawa (Governor)
Hirohide Yamaguchi (Deputy Governor)Kiyohiko G. Nishimura (Deputy Governor)
Miyako Suda
Tadao Noda
Seiji Nakamura
Hidetoshi Kamezaki
Ryuzo Miyao
Yoshihisa Morimoto(Others present)
September 6
From the Ministry of Finance:
Yasushi Kinoshita, Deputy Vice Minister for Policy Planning and Co-ordination(14:00-16:29)
From the Cabinet Office:Kenji Umetani, Director-General, Economic and Fiscal Management (14:00-16:29)
September 7
From the Ministry of Finance:
Motohisa Ikeda, Senior Vice Minister of Finance (9:21-12:21,12:26-12:34)
From the Cabinet Office:Keisuke Tsumura, Parliamentary Vice-Minister (9:00-12:21,12:26-12:34)

Release of the Monthly Report of Recent Economic and Financial Developments:
14:00 on Wednesday, September 8 (Japanese)
16:30 on Thursday, September 9 (English)-- The English translation of the summary of the Monthly Report will be
released at 14:00 on Wednesday, September 8
Release of the minutes:
8:50 on Friday, October 8